German car giant Volkswagen is reported to be close to buying a major stake in struggling Malaysian rival Proton.

VW could pay up to $440m (£250m) for a 30% stake in Proton, the Reuters news agency said.

Press reports earlier this month suggested a deal with VW had been opposed by Proton's senior management.

News of renewed efforts to reach a deal came as VW posted a 5.2% rise in first-half pre-tax profits to 672m euros ($532m; £303m), from 639m euros.

VW said its pre-tax earnings during the six months to the end of June had been boosted by two joint ventures in China.

Overall, Europe's biggest carmaker said it had delivered 2.56 million cars in the first half of 2005, up from 2.52 million the year before.

Asia plans

The Malaysian government owns a 42.7% share in Proton through its investment arm Khazanah Nasional.

Proton has been struggling to match its Asian rivals

Both sides have been in talks for some time over a proposed alliance, although it is thought that the Malaysian government would be unwilling to ditch its controlling 'golden share' in the company.

Proton has been struggling to match its Japanese and South Korean rivals, and has seen its domestic market share fall to 30% from 57% in the early 1990s.

A deal with VW would give Proton access to the German company's technology. VW, in turn, would obtain greater access to Asian markets, which last year accounted for less than 7% of its sales.

Earlier this month, VW said it had postponed making a decision on plans to build a new factory in India. It later paid the Indian state of Andhra Pradesh about 2 million euros in compensation for misdealings linked to the carmaker.

VW has been reeling from a bribery scandal, which has so far claimed the heads of several senior executives, including a close advisor to German Chancellor Gerhard Schroeder.